TASI flatlines despite bank merger news boost

News of a potential merger between two of Saudi Arabia’s lenders that could lead to the creation of the Kingdom’s third largest banking entity, failed to sustain an early spurt in Riyadh’s benchmark gauge on Wednesday.

The Tadawul All Share Index (TASI) closed flat at 6,917 amid volumes of SAR 3 billion.

However, the news lifted the financial sector. Alawwal Bank and Saudi British Bank (SABB) rose nearly 9 percent to SAR 11.40, and 4 percent at SAR 22.85 respectively after disclosing that they had initiated discussions on a possible merger.

“Both stocks are trading at P/tNAV of 0.9-1x and as such, we expect the swap ratio to be very close to CMP, with no preference for Alawwal or SABB as a play into a merger,” Jaap Meijer, managing director of research at Arqaam Capital said in a comment on LinkedIn.

However, he preferred SABB on stronger capital buffer, better asset quality and return on risk weighted assets.

Elsewhere, retailer eXtra jumped 7 percent to SAR 37.90 after it swung to a first quarter net profit of SAR 13 million.

NADEC rose nearly 3 percent to SAR 31.70. The food and dairy producer is expected to realize a capital gain of SAR 22 million if a purchase offer to acquire NADEC’s stake in Pure Breed Poultry Co. for SAR 25 million goes through.  

Meanwhile, Yansab fell 4 percent to SAR 55.75. The SABIC affiliate’s Q1 net  profit of SAR 608 million revealed no positive surprises. SABIC itself fell nearly 2 percent to SAR 94.50.

Hail Cement fell nearly 3 percent to SAR 10.85, its lowest in over three months. The company reported a 74 percent drop in net profit to SAR 8.3 million. 

Write to Brinda Darasha at brinda.d@argaamplus.com